Adding a second income to your household opens a host of opportunities to reduce your debt, build your assets and improve your lifestyle. Having both adults in a household work also has downsides that can outweigh the benefits.
Deciding whether or not a double income is worth the problems that come with it requires calculating the real after-tax and post-expenses monetary gain, the lost opportunity costs and the work-life balance issues involved. So, is a second income beneficial to you and your partner? We help decide.
One of the factors to consider when looking at a second partner taking a job is the increased expenses the two of you will incur. This might include a new wardrobe, commuting costs, childcare, lunches and expenses such as equipment, training, computers or a cell phone that you’ll need to perform the work. While some of these costs might seem small, when added to others, they can take a chunk out your paycheck that’s already being decreased by payroll taxes.
Paying $10 per week for the subway, for example, adds up to $500 per year. If you drive, you might pay more than $100 per month in gas. Your lunches might tack on another $1,500. Add to that some larger monthly expenses such as clothing, hair, nails and day care and that fat paycheck you thought you were getting shrinks pretty fast.
Any increase in taxes you pay by adding a second income might not be enough of a reason to avoid taking a job, but it’s worth it to take a look at how your income tax rate will change when the two of you bring home a paycheck. A pay increase might also lose you deductions.The difference might work out in your favor, or only be a small increase. But adding that small tax increase in with your other expenses might make your net take-home pay too low to justify the position.
When you make one choice, you often lose the opportunity to take another. The most obvious opportunity cost of dual workers is the inability to keep one parent home with their children and all of the benefits that brings.
If you enter the workforce, you might also have to give up another opportunity you’ve wanted to pursue, such as going back to school and earning another degree or certificate, studying for and obtaining a professional certification, writing a book, developing a new skill set that qualifies you for a career in another profession or getting involved in community social work. Before you convince yourself that you can work and pursue another goal in your spare time, consider how you’ll feel after getting up at 7:30 a.m., getting back home at 6:30 p.m, making dinner, cleaning up, doing household chores and having only one or two hours at a reduced energy level to pursue another activity. Don’t forget the added workload for the partner who was already working.
If the second partner starts working, the first partner is now going to have to help with laundry, shopping, cooking, child care and other tasks the second partner did while he or she previously stayed at home.
When a working partner has someone to come home to who hasn’t been dealing with an obnoxious boss, inconsiderate co-workers or rude customers, he or she has someone to commiserate with and blow off steam. This support system often disappears when two partners get home with stress issues and can be in bad moods. In addition to having a lack of support, partners who both work might be more likely to snap at each other and create relationship problems.
If both partners aren’t willing to equally share the “honey-do list” — like taking turns doing the laundry, washing dishes, taking out the garbage and cleaning bathrooms — the partner who hasn’t previously been doing these tasks might become resentful.
If the second income isn’t enough to make up for the stress and opportunity costs that come with it, the benefits offered by a new company might make the job worth it. The second spouse who takes a new job might qualify for a better health insurance program or 401(k) match. In addition, you’ll boost your Social Security contributions if those taxes are taken out of your paycheck. You might also have access to low-cost voluntary benefits such as vision, dental, pet health, life, and disability income insurance.
Consider Part-Time Work
Once you’ve subtracted the increased expenses and tax impact from a second income, run the numbers that come with a part-time job. If that part-time job is one that allows you to work remotely, you’ll have lower expenses than with a full-time job — no gas, wardrobe, childcare, eating lunch out, etc. — which will allow you to keep more of your paycheck. Plus, if you use a dedicated room in your house to perform the work, you might be able to write off that square footage and the utilities that go with it.
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